The Reserve Bank’s decision to hold interest rates this week was a kick in the guts forpeople who had been hanging out for some relief – especially Gen-Z owners who are feeling the pressures of home ownership for the first time.

Overall, the pain was felt hardest in Sydney and Melbourne’s outer suburbs which have the highest mortgage arrears in the country.

The Reserve Bank defied expectation of an interest rate cut on Tuesday, and new Domain data reported in Sydney Morning Herald shows that this decision was made despite evidence that mortgage stress is starting to affect home owners’ mental health as well as their hip pockets.

And with more people falling behind in mortgage repayments, it’s GenX that’s hurting the most.

Young owners in strife

Finance guru David Koch – who comments for Compare the Market – told realestate.com.au nearly half of Australians are feeling mental health impacts from financial stress, with Gen Z hit hardest.

“For many, it feels like an uphill battle to pay rent, bills and groceries, afford to socialise, and try to have savings for a home deposit when almost everything is climbing up,” he says.

New research released by Compare the Market had Kochie saying it’s not just people’s homes that are at stake, but also health, sleep and relationships.

Victoria hit the hardest

Victoria has the highest overall mortgage arrears rate (1.17%), followed by NSW (1.07%). This might be why Melbourne units are so much more affordable than other eastern capital cities.

The Reserve Bank says arrears have risen in every state since 2022, though arrears could may soon stabilise as rates fall and inflation slows. The bank took the unprecedented step of publishing its ‘record of votes’ for and against a rate cut.  “Today’s policy decision was made by majority; 6 in favour, 3 against,” it announced on Tuesday, much to the annoyance of some commentators.

Homeowners in Sydney’s and Melbourne’s outer suburbs are falling behind on mortgage payments. High inflation and falling household savings are key reasons for the affordability problems. 

At the end of March, five of the 10 suburbs that had the highest level of home-loan arrears were in Victoria and four in NSW. Victoria’s Craigieburn, Caroline Springs, Narre Warren, Pakenham and Melton South are on this list, while in Sydney it’s Blacktown, Liverpool and Campbelltown.

Queensland had only one postcode featured in the latest S&P Global Ratings list of the 10 worst-performing postcodes.